As paperwork goes missing, private student loan debts may be wiped away

Private Lenders Struggle to Prove Ownership of Student Loans in Court

A group of creditors may not be able to collect on the loans even after taking student borrowers to court because of the missing paperwork, The New York Times reported.

National Collegiate owns around 800,000 private student loans totalling around $12 billion, according to The Times. He is Donald Uderitz, the founder of Vantage Capital Group, a private equity firm in Delray Beach, Fla., that is the beneficial owner of National Collegiate's trusts. "I question whether they actually possess the documents necessary to show that they own loans", Ms. Smith said.

Document: National Collegiate's Audit of P.H.E.A.A.

The ongoing student loan debt crisis is causing comparisons to the sub-prime mortgage crisis 10 years ago when billions of dollars in loans were wiped away because of missing or false documentation. If you have enrolled in a for-profit college program, keep records of all of your interactions with the school and find out of you are eligible for Borrower Defense Repayment.




While experts say National Collegiate is one of the most aggressive private loan holders, it still doesn't usually bring a lawsuit until borrowers are at least several months overdue on their payments, Gaudreau says. New York City's Civil Court dismissed four lawsuits filed by the NCSLT against Watson, and relieved the woman of $31,000 in debt. Once borrowers are sued, most either choose to settle or ignore the summons, which allows the trusts to obtain a default judgment.

Very few cases ever make it to trial, according to court records and borrowers' lawyers.

Judges in New Hampshire, Ohio, Texas and other states have tossed out lawsuits by National Collegiate because it could not prove it owned the debt it was trying to collect, and the Times reports that the legal wrangling is now playing out in Pennsylvania and DE with no end in sight.

Transworld did not respond to a request for comment by DealBook.

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